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Papers Show Bush Played Active Role at Harken
Thu Jul 25, 7:25 PM ET
By Adam Entous
WASHINGTON (Reuters) - President Bush ( news - web sites) played an active role in Harken Energy Corp's business decisions and consulted with the head of the company shortly before a controversial 1989 transaction which drew scrutiny from the Securities and Exchange Commission ( news - web sites), documents released on Thursday show.
The information raised fresh questions about the extent of Bush's role as a director at Harken more than a decade ago. Democrats have seized on the Harken transactions and Vice President Dick Cheney ( news - web sites)'s tenure at Halliburton Co. to paint the Republican administration as compromised by insider deals and close business connections.
Given public outrage over stock market losses triggered by a wave of corporate scandals, the scrutiny could undercut Bush's public standing and hurt Republicans in the November congressional election, polls show.
White House officials said Democratic attacks were politically motivated and without merit. "The career staff of the SEC reviewed all of the documents in this matter and concluded that there was no case, that the president had acted appropriately," White House spokeswoman Claire Buchan said.
According to a June 15, 1989 letter from Harken President Mikel Faulkner, obtained by the nonpartisan Center for Public Integrity, Bush frequently advised Harken management on "organizational and strategic matters."
In the letter, Faulkner praised Bush for "the positive image you have helped create regarding Harken Energy Corporation, the intuitive analysis you have provided on our various acquisitions, operating decisions at the board level and the personal suggestions and ideas you have shared with me over the past two years on a CEO to CEO basis."
"I consider the role which you play at Harken Energy Corporation to be a very meaningful and significant role and look forward to a continuing relationship," Faulkner said in his letter to Bush.
Documents show the two met just two weeks before Harken's controversial sale in 1989 of its Aloha Petroleum subsidiary, a transaction which critics have compared to the accounting irregularities at bankrupt energy trader Enron Corp. .
The company's initial treatment of the Aloha sale significantly understated the losses Harken first reported for 1989. Under a subsequent agreement with the SEC, Harken restated its financial statements for 1989 and for the first nine months of 1990. As a result of accounting changes, Harken's 1989 loss widened to $12.57 million from the $3.33 million loss initially reported.
Bush has denied wrongdoing, saying the Aloha matter reflected an honest disagreement over accounting. "All I can tell you is, that in the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures," he said earlier this month.
In addition to the Aloha deal, Bush is under pressure to explain his sale of 212,140 shares of Harken stock at $4 per share, or $848,560, on June 22, 1990. Two months later, the company announced bigger-than-expected losses for the quarter ending June 30, and its stock price plunged.
Democrats point to documents showing Bush was told that Harken faced serious cash flow problems in the weeks and months before he sold his stock holdings.
Two weeks before selling his shares, Bush was sent a company report giving "information provided by subsidiaries regarding estimated historical and projected earnings." Earlier in the year, Bush received a letter from Harken's president warning that the company would "continue to be severely limited in our activities due to cash constraints."
An internal memo dated May 20, 1990 also warned of the possibility that Harken would "deplete all available cash to pay payroll and other basic needs."
The SEC investigated and concluded in a March 18, 1992 memorandum: "It appears that Bush did not engage in illegal insider trading because it does not appear that he possessed material nonpublic information."
A week earlier, Rep. John Dingell, a Michigan Democrat who at the time chaired the House subcommittee on oversight and investigations, asked the SEC to provide his staff with a confidential briefing on its investigation of Bush's stock trades, newly-released documents show.
"We are looking into the administration and enforcement of the federal securities law by the commission with respect to the prohibitions concerning insider trading," Dingell wrote.
Cheney has refused to comment on the SEC's investigation of how Halliburton accounted for cost overruns. But Bush said earlier this month that he was confident the federal probe would show his vice president did nothing wrong.
-- (Poppy Bush @ whitewashed. little Dumbya's dirty dealings), July 26, 2002